The $71 Billion Break: Why Reforming Religious Subsidies Will Benefit Us All

Now more than ever, the United States needs to change its laws surrounding religious subsidies. Last year, the state of Florida cut over $1.3 billion from the budget meant for public schools as well as $1.1 billion for police and firefighter pensions. If Florida had collected property taxes on religious institutions, the revenue would have been $2.2 Billion, almost enough to cover both of these budgetary expenses. In fact, the debate over religious tax exemptions has recently been distilled down to one number: 71 billion dollars. That’s the total amount that the government forgoes every year in religious subsidies, and clearly, there are places that this money could be put to use.

It’s not that religious organizations are unimportant to our civil society, nor should churches necessarily be stripped of all the privileges they enjoy. Rather, we should reform our tax law to ensure that churches really are doing good work with the money they are given. It will not weaken religious groups to put them on equal footing with the other non-profit organizations in our country.

The $71 billion sum comes from Prof. Ryan Cragun of the University of Tampa. He and his students arrived at this number by adding up the various government subsidies that churches enjoy (these include the parsonage exemption, income tax subsidies, and property tax subsidies among others). Other charitable groups are also eligible for some of these benefits—the difference is that secular nonprofits are responsible for reporting their finances. If a nonreligious charity wants to maintain its tax free status, they must prove they are addressing the issues they claim to work on—such as poverty, homelessness, or health care. The American Red Cross, for instance, spends 92.1 percent of its budget directly on the needs of those it aims to assist.

However, the primary function of a church is not to provide charity as much as it is to address spiritual concerns. For example, the Mormon Church gives about 0.7 percent of its annual income to charitable causes. Other churches, like the United Methodist Church, give significantly more (about 29 percent of its annual income 2010). Yet, as the study’s authors point out, even if a 50 percent cutoff is used to determine whether an institution is primarily a charitable organization, there may not be a single religion that would qualify.

Even so, churches do not have to apply for tax exempt status; they get it automatically. Additionally, while all other 501(c)(3) charities are restricted in their political activities, churches go as far as to intentionally flout these rules, blatantly daring the IRS to take actions against them. This lack of regulation is especially troubling considering the $71 billion of government money at stake. Doesn’t the government have an interest in ensuring that a church is respecting its 501(c)(3) designation, and doesn’t the privileging of religious groups over secular institutions represent an unconstitutional endorsement of religion?

Not everyone believes in the same answers to these questions. In a May 2012 New York Times opinion piece, Prof. Mark Rienzi, senior counsel at the Becket Fund for Religious Liberty, responded directly to a prompt about religious tax breaks. He wrote that “What is good for religion is good for America,” and noted that religious exemptions (including tax laws) help churches remain independent from the government. These institutions then use their independence to act as instrumental forces for good in the public sphere. As evidence, Rienzi asks us to look at the history of the United States: From Quakers leading the charge against slavery to Martin Luther King Jr. and the SCLC, the whole nation benefits when religious groups share their beliefs with the American community.

With this popular line of reasoning, Rienzi manages to sidestep the question at hand. He swiftly frames his argument as a general defense of all religious privileges and thus avoids engaging the concern of tax exemptions in any detail (while also declining to mention any of the religiously informed bigotry of our past and present).

As a start, religious organizations should separate their charitable activities and finances from their religious activities and finances. This way, we can be sure that money is not being used for political or personal purposes. However, even this practical solution is unlikely to gain much traction in today’s political environment, because Rienzi and others fear that by keeping church financial records honest, we may encroach on the crucial “breathing space” that religious individuals and institutions need to exist. Ultimately however, a church that operates like any other charity will depend less on government exemptions and will be more likely to do work that does the most good for the most people in our society.